DIV-1099 and INT-1099 income tax exceeding penalty...
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Level 1

DIV-1099 and INT-1099 income tax exceeding penalty threshold

I was going over my taxes and notice that this upcoming year I will be on the mark with my federal when examining what my employer withheld and the taxes I owe are.

 

However, I noticed my dividends at the current rate will exceed the $1000 for taxes and the 90-percent rule for penalties since my dividends are in post tax accounts.  Is there really a penalty on dividend and interest or did I miss something?  How can I avoid the penalties aside from adjusting my W4 especially if the institution can't withhold federal taxes?

 

5 Replies
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Level 15

DIV-1099 and INT-1099 income tax exceeding penalty threshold

You can increase your W2 withholding to cover the extra tax

 

or you can ask them to take withholding out of the interest & dividends

 

or you can send in quarterly estimates.  Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

 

The 1040ES quarterly estimates are due April 15, 2019, June 17, Sept 16 and Jan 15, 2020.  Your state will also have their own estimate forms.

 

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2019 Estimate

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Level 15

DIV-1099 and INT-1099 income tax exceeding penalty threshold

are your dividends taxable?  qualified dividends might be taxed at 0%

if your 2019 federal taxes due less withholding is $1000 or less - no penalty.

if withholding is 90% of 2019 taxes  - no penalty

if your withholding is 100% of 2018 tax or 110% if adjusted gross income over $150,000  - no penalty.  

 

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Level 1

DIV-1099 and INT-1099 income tax exceeding penalty threshold

They are ordinary dividend and can't be subjected to lower taxes like qualified dividends.

 

W4 is currently 0 exemption which means max withholding from employer with no other employer to perform federal withholdings from me.

 

taxes I'm estimating are for 2019 (this year).

 

So, what I'm think I'm hearing is that I need to add additionsl withholding amount on my W4 since I don't want to go through the hassle of quarterly estimate filing.

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Level 15

DIV-1099 and INT-1099 income tax exceeding penalty threshold

See my previous thread. Even if the dividends are fully taxable as other ordinary income, if you meet any of the exceptions  I posted, there will be no penalty.  Under the 2nd and 3rd exceptions you could even end up owing millions and there would be no penalty.   however, if you do not like the idea of possibly of owing, even if no penalties,  then increase your withholding.  

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Level 1

DIV-1099 and INT-1099 income tax exceeding penalty threshold

Just to be clear.

 

  1. are your dividends taxable?  YES qualified dividends might be taxed at 0%. (they are ordinary dividends)
  2. if your 2019 federal taxes due less withholding is $1000 or less - no penalty. (Comparing 1040 tax chart and estimated tax withheld on all possible W2 for 2019 (including 1099 forms and anything else), the arithmetic shows taxes owed will be greater than $1000)
  3. if withholding is 90% of 2019 taxes  - no penalty (90% of owed taxes from #2 above is less than what has been withheld from W2 forms and other withholding documents.  Somewhere around 85% or so.)
  4. if your withholding is 100% of 2018 tax or 110% if adjusted gross income over $150,000  - no penalty.  (NA since dealing with 2019)

So based on my answers here, I need to either increase my withholdings on W4, do estimate quarterly, or pay at the IRS website prior to year end (as VolvoGirl indicated).  Increasing my W4 withholding is a better choice to me.

 

Correct me if I misunderstood everything.

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